Small Business Credit Cards: Procede With Caution

Approximately 70% of small businesses in the U.S. use
credit cards to pay expenses. Of those, almost half use cards for ALL expenses. If you're using a credit card for your company, there are many things to consider. Some of which can be downright dangerous if you're not careful. Now, this is not an anti-credit card post. So let's begin with the benefits of using a credit card.

Benefits:

CREDIT
Today it's more important than ever to have good credit. Getting a loan of any kind is nearly impossible for some business owners, and just plain tough for even some of the best qualified. Having good credit makes the lending process a bit easier, and a small business credit card may allow a business the chance to build up their credit.

KEEPING TRACK
It's tough to keep track of expenses if you're mixing business with personal. Using a small business credit card allows you to easily separate the two. It also provides a small business owner with a quick and easy way to tally up expenses at tax time. Most credit card companies offer business owners a summary statement categorizing the prior years transactions, which comes in very handy when your accountant calls.

EMPLOYEE SPENDING
If your employee(s) are authorized to spend for you, then you may want to give them a credit card with preset amount that they are limited by. This way you'll never have to wonder if they spend more than you've budgeted for.

And there are other benefits that go along with any credit card like payment grace periods and the ability to use online banking tools.

But now, let’s explore the negatives of using a credit card for your small business:

Drawbacks:

LATE PAYMENTS
If you run into any kind of trouble paying your business credit card, you'll have to deal with late fees. Additionally, the credit card company may raise your interest rate on the card. These things essentially negate the positives associated with using your small business credit card.

DEBT
Even if you're able to pay the balance off in time each month, a business credit card, like any form of loan, adds more debt to your pile -- and even if it's a small addition to the pile, it's still a burden businesses should try to avoid. Any credit, especially credit that can be pulled from a wallet at a moment's notice, can be a dangerous thing. We've all experienced the temptation of purchasing something we know we shouldn't buy. It's tough to resist when the guy on your shoulder holding a pitchfork keeps asking, 'Hey, what's another $90 payment a month?'. And when you're faced with something your business needs, even though you know you don't have the budget for it, if the credit is there, you're likely to pull the trigger. This can be troublesome to a business if it gets out of control.

A different approach to generating the funds needed for expenses involves FACTORING. Factor King has helped thousands of clients to use their own account receivables to generate cash. It's a much better proposition for a business to use the money that’s owed to them rather than increasing the money they owe to someone else.

Learn more about factoring.